C REATIVE LEARNING CLASSES II PU ANNUAL EXAMINATION APRIL - MAY - 2022 ACCOUNTANCY KEY ANSWERS SECTION A (1 MARK ANSWERS) 1. SOCIETY 2. b) 2 3. 1.Time Factor 2. Nature of Business 3. Efficiency of Management 4. False 5. W h e n a p a r t n e r r e t i r e s c o n t i n u i n g p a r t n e r s c a n g e t s o m e g a i n / b e n e f i t o f t h e r e t i r e d p a r t n e r ’ s share, the Ratio in which old partners got the benefit is called Gaining Ratio (Benefit Ratio) 6. Death of a Partner 7. The shares of a shareholder will be forfeited when there is a failure on the part of the shareholder to pay the allotment money or call money due on the shares. 8. Debenture Redemption Fund Investment (DRFI) 9. Statement of Profit and Loss and Balance sheet. 10. Horizontal Analysis 11. Sundry Creditors / Bills Payable / Out Standing Expenses 12. d) All the Above Section B 13. A not - for - profit organization is an organization that focuses on a particular social cause, and all the money earned or donated is used in pursuing its objectives and meeting operational costs. Unlike for - profit corporations, 14. Fluctuating C apital System is the method where interest on capital, salary, commission, or any other types of remuneration payable to partners are directly credited to partner’s capital account, drawings & interest on drawings are debited; here current accounts are not prepared, and the Capital amounts are not fixed, 15. Reasons for Admission of a partner 1) To secure additional capital. 2) To secure additional managerial skill. 3) To Expand Business 4) To increase the Goodwill of the firm 16. R e a l i z a t i o n A / C ................................ ......... D R T o S u n d r y A ss e t s A / C 17. 1. A uthorized Capital 2. I ssued Capital 18. The following are the limitations of financial statements: 1. Dependence on historical costs 2. Financial Statements Are Not Adjusted for Inflation 19. Two techniques of Financial Statement Analysis. 1. Comparative Statements. 2. Common size Statement. 20. 1. The most important objective that is fulfilled by preparing Cash Flow Statement is to ascertain the gross inflows and outflows of cash and cash equivalents from various activities. 2. Secondly, Cash Flow Statement helps in analyzing various reasons responsible for change in the cash balances during an accounting year. Section C 21. D R P & L A pp r o p r i a t i o n A / c f o r t h e y e a r e n d i n g 31 - 03 - 2021 C r To Interest on capital, B y P & L A / C X 10% x 2,00,000 = 20,000 Y 10% x 1,50,000 = 15,000 35,000 ( Profit before adjustment) 80,000 To Salary to Y 4,000 By Interest on drawings , To Commission to X 2,000 X = 2,000 Y = 1,000 3,000 T o P a r t n e r s c a p i t a l A / C , X (3/5) = 25,200 Y (2/5) = 16,800 42,000 83,000 83,000 22. D a t e A m o u n t period P r o du c t 01 - 04 - 20 6,000 12 72,000 30 - 06 - 20 8,000 09 72,000 01 - 12 - 20 9,000 04 36,000 31 - 03 - 21 2,000 00 00,000 1 ,80,000 interest on drawings= total product X Rate X 1/12 180000 X 10/100X1/12 Rs. 1500 23. Sacrifice Ratio = Old Profit Sharing Ratio – New Profit sharing Ratio Raja = 5 1 = 15 – 08 = 7 8 3 24 24 Kiran = 3 1 = 0 9 – 08 = 1 8 3 24 16 Therefore Sacrifice ratio = 7 : 1 24. D R S o n u ’ s c a p i t a l A / C C R By Balanc e b/d 25,000 T o S o n u ’ s E xe c u t o r s L o a n A / C 4 7 , 12 5 By Reserve Fund (1/ 4 x 24,000) By Interest on Capital 6 ,000 (balance transferred) 10% x 25,000 x 3/12 B y M a ll i k ’ s A / c = 6 , 000 625 B y P a ll a v i ’ s A / c = 6 , 000 12,000 B y P & L S u s p e n s e A / c 3,500 4 7 , 12 5 4 7 , 12 5 Sonu’s share of Goodwill = 12,000 Gained by Mallik and Pallavi in 1 : 1 Ratio Mallik’s share = 1/2 x 12,000 = 6,000 Pallavi’s share = 1/2 x 12,000 = 6,000 J ournal entries in the books of Shres h ta company limited D ate Particulars DR CR 1) B a n k A / C ................................ ................................ D R T o D e b e n t u r e s A pp l i c a t i o n A / C (Being Application money received on 20,000 debentures of Rs 15 each) 3,00,000 3,00,000 2) 3) D e b e n t u r e s A pp l i c a t i o n A / C ................................ ......... D R T o 5 % D e b e n t u r e s A / c ( B e i n g A pp l i c a t i o n m o n e y t r a n s f e rr e d t o 5 % D e b e n t u r e s A / C ) 3,00,000 8,00,000 3,00,000 8,00,000 D e b e n t u r e s A l l o t m e n t A / C ................................ ................ D R T o 5 % D e b e n t u r e s C a p i t a l A / c ( B e i n g A ll o t m e n t m o n e y t r a n s f e rr e d t o 5 % D e b e n t u r e s A / C ) 4) 5) 6) B a n k A / C ................................ ................................ D R T o D e b e n t u r e s A ll o t m e n t A / C (Being Allotment money received on 20,000 debentures of Rs 40 each) 8,00,000 9,00,000 9,00,000 8,00,000 9,00,000 9,00,000 D e b e n t u r e s I s t & F i n a l C a l l A / C T o 5 % D e b e n t u r e s C a p i t a l A / c (Being I st & Final Call money transferred to 5% Debentures) B a n k A / C ................................ ................................ D R T o D e b e n t u r e s I s t & F i n a l C a l l A / C (Being Allotment money received on 20,000 debentures of Rs 45 each) 26) Balance sheet of Lakshmi. Co. ltd as at 31 s March 2021 as per Schedule III of the Companies Act 2013 Note No Rs S O U R C E S O F F U N D S ( E Q U I T Y / L I A B I L I T I E S ) I SHARE HOLDERS FUND a) Share capital 1,70,000 b) Reserves and Surplus 1 1,20,000 II NON CURRENT LIABILITIES III a) Long term Borrowings CURRENT LIABILITIES 1,20,000 a) Trade Payables 70,000 TOTAL 4,80,000 APPLICATION OF FUNDS (ASSETS) I NON CURRENT ASSETS a) Fixed Tangible Assets 2,50,000 II CURRENT ASSETS a) Inventories 80,000 b) Cash or cash equivalents 1,50,000 TOTAL 4,80,000 Note 1: Reserves and Surplus Statement of Profit or Loss General Reserve 50,000 70,000 1,20,000 27) 28. Cash Flows from Operating Activities (In - direct Method) Particulars Amount Net Profit Before Tax and Extra Ordinary Items 5,00,000 Deductions already made in Profit and Loss on account (+) Depreciation 2,00,000 ( – ) Profit on Fixed Assets - 50,000 Operating Profit before Change in Working Capital 6,50,000 ( – ) Increase in Current Assets (Trade Receivable) - 40,000 (+) Increase in Current Liabilities + 60,000 Net Cash From Operating Activities 6,70,000 Section D (12 Marks) 26 ) D R I n c o m e a n d E x p e n d i t u r e A / C f o r t h e y e a r e n d i n g 31 / 03 / 2021 C R Expenditure Rs. Income Rs. To Salary 22,000 By Subscription 26,000 A dd O / s C u rr e n t y e a r + 3 , 400 L e ss : O / s L a s t y e a r - 2 , 400 L e s s O / s L a s t y e a r - 6 , 000 19,400 A dd O / s C u rr e n t y e a r 4 , 000 To Postage 1,000 Less Adv Current year - 2,000 25,600 To General Expenses To Lighting Charges 2,000 400 By Sale of Old newspapers 400 A dd O / s C u rr e n t y e a r + 500 2,500 By Sports Fees 2,400 To Depreciation on Assets 13,000 By Rent Received 12,000 To Surplus 4,100 40,400 40,400 Balance - Sheet as on 31/03/2021 Liabilities Rs Rs Assets Rs Rs Capital fund 64,000 Furniture 18,000 + Entrance Fees 6,000 Add Purchases 20,000 + Surplus Building Donation 4,100 74,100 40,000 Less Depreciation Sports Material - 1,000 35,000 37,000 O / S S a l a r y 3,400 Add Purchases 14,000 O / S L i g h t i n g 500 Less Depreciation - 12,000 37,000 Investments 30,000 Advance Subscription 2,000 Cash 12,000 O / S S u b s c r i p t i o n 4,000 1,20,000 1,20,000 Current Ratio = Current Assets = 1,44,000 = 1.38 (1.38 : 1) Current Liabilities 1,04,000 Quick Ratio = Quick Assets = 90 ,000 = 0. 87 (0. 87 : 1) current Liabilities 1,04,000 30. D r R e v a l u a t i o n A / C C r To Depreciation on Machinery 1,500 By Old P.D.D 3,000 To Depreciation on Furniture 1,000 By Appreciation on Building 9,000 To New P.D.D 6,000 T o O l d p a r t n e r s c a p i t a l A / C Akhila’s capital 2,100 Bhagya’s capital 1,400 3,500 12,000 12,000 D r P a r t n e r s C a p i t a l A / C C r Particulars Akhila Bhagya Chan Particulars Akhila Bhagya Chan T o P & L A / c 9,000 6,000 By balance .b/d 80,000 40,000 -- T o C a s h A / c 18,000 12,000 By Gen Reserve B y C a s h A / c 18,000 18,000 12,000 12,000 -- 40,000 To balance c/d 91,100 47,400 40,000 By Revaluation 2,100 1,400 -- 1,18,100 65,400 40,000 1,18,100 65,400 40,000 New Balance – sheet as at 01 - 04 - 2021 Liabilities Rs Rs Assets Rs Rs Capitals Land & Building 60,000 Akhila’s Capital Bhagya’s Capital 91,100 47,400 Add Appreciation 9,000 69,000 Chandana’s Capital 40,000 1,78,500 Furniture Less: Depreciation 20,000 - 1,000 19,000 Creditors 48,000 Bills Payable 20,000 Machinery Less: Depreciation 30,000 - 1,500 28,500 Debtors 60,000 Less: New P.D.D Stock - 6,000 54,000 20,000 Cash at Bank 16,000 Add: Akhila’s Cap + 18,000 Add: Bhagya’s Cap +12,000 Add: Chandana’s Cap + 40,000 Less: Akhila’s Cap - 18,000 Less: Bhagya’s Cap - 12,000 56,000 2,46,500 2,46,500 31. D r R e v a l u a t i o n A / C C r To Depreciation on Machinery 1,000 By Appreciation on Stock 6,000 To Depreciation on Furniture 750 By Appreciation on Building 10,000 To New P.D.D B y P a r t n e r s c a p i t a l A / C 4,200 By Old P.D.D 2,000 Abhay’s capital 4,820 Bhuvan’s capital 4,820 Chetan’s capital 2,410 12,050 18,000 18,000 D r A l l P a r t n e r s C a p i t a l A / C C r Particulars Abhay Bhuvan Cheta Particulars Abhay Bhuvan Cheta T o C h e t a n ’ s A / c 2,000 2,000 -- By Balance .b/d 60,000 50,000 40,000 -- By Reserve Fund 12,000 12,000 6,000 To Cheta’s Loan -- -- 53,410 B y P & L A / c 2,000 2,000 1,000 To Balance c/d 76,820 66,820 -- B y A b h a y ’ s A / c -- -- 2,000 B y B hu v a n ’ s A / c -- -- 2,000 By Revaluation 4,820 4,820 2,410 78,820 68,820 53,410 78,820 68,820 53,410 New Balance – sheet as at 31 - 03 - 2021 Liabilities Rs Assets Rs Capitals Land & Building 80,000 Abhay’s Capital 76,820 Add: Appreciation 10,000 90,000 Bhuvan’s Capital 66,820 1,43,640 Machinery Less: Depreciation 20,000 - 1,000 19,000 Chetan’s Loan 53,410 Furniture Less: Depreciation 15,000 - 750 14,250 Creditors 30,000 Stock 30,000 Bills Payable 10,000 Add: Appreciation 6,000 36,000 Debtors 42,000 Less: P.D.D - 4,200 37,800 Cash 40,000 2,37,050 2,37,050 32. D R R e a l i z a t i o n A / c C R To Sundry Assets By Sundry Liabilities Stock 10,000 Loan 3,000 Furniture Debtors 4,000 20,000 Creditors 3,000 6,000 Plant & Machinery 22,000 56,000 B y C a s h / B a n k A / c Stock 9,000 T o C a s h / B a n k A / C Loan 3,000 Furniture 3,500 12,500 Creditors 3,000 B y M o h a n ’ s A / c Realization Expenses 500 6,500 Machinery Taken Over 25,000 B y P u n i t h ’ s A / c Debtors Taken Over 18,000 B y P a r t n e r s c a p i t a l A / C Mohan’s capital 750 Punith’s capital 250 1,000 62,500 62,500 D r P a r t n e r s C a p i t a l A / C C r Particulars Mohan Punith Particulars Mohan Punith T o P & L A / c T o R e a l i s a t i o n A / c 9,000 3,000 B y b a l a n c e ... b / d By Reserve Fund 40,000 6,000 20,000 2,000 (Asset Taken over) 25,000 18,000 T o R e a l i s a t i o n A / c (Loss) 750 250 T o C a s h / B a n k A / C 11,250 750 46,000 22,000 46,000 22,000 D r C a s h / B a n k A / C C r T o B a l a n c e b / d T o R e a l i z a t i o n A / c 6,000 12,500 B y R e a l i z a t i o n A / c By Mohan’s capital By Punith’s capital 6,500 11,250 750 18,500 18,500 33. Issue of shares entries in the books of Hema Company Date Particulars DR CR 1) 2) 3) 4) 5) 6) 7) 8) 9) B a n k A / C ................................ ............................... D R T o E q u i t y s h a r e A pp l i c a t i o n A / C (Being Application money received) 4,00,000 4,,00,000 10,00,000 10,00,000 8,00,000 7,76,000 60,000 48,000 12,000 24,000 4,00,000 4,,00,000 9,00,000 1,00,000 10,00,000 8,00,000 7,76,000 24,000 36,000 60,000 24,000 E q u i t y s h a r e A pp l i c a t i o n A / C ................................ ..... D R T o E q u i t y s h a r e C a p i t a l A / C ( B e i n g A pp l i c a t i o n m o n e y t r a n s f e rr e d t o c a p i t a l A / C ) E q u i t y s h a r e A ll o t m e n t A / C ................................ ..... D R T o E q u i t y s h a r e C a p i t a l A / C T o S e c u r i t y P r e m i u m A / c (Being Allotment money is due) B a n k A / C ................................ ............................... D R T o E q u i t y s h a r e A ll o t m e n t A / C (Being Allotment money received) E q u i t y s h a r e I s t & F i n a l C a l l A / C ............................... D R T o E q u i t y s h a r e C a p i t a l / C (Being Calls money due) B a n k A / C ... ............... ... 1 9 , 400 x 40 ....................... D R T o E q u i t y s h a r e I s t & F i n a l C a l l A / C (Being I & Final Call money received) E q u i t y s h a r e C a p i t a l A / C ... ... ... ( 600 x 100 ) ................ D R T o I s t a n d F i n a l c a l l A / C ( C a l l s i n A rr e a r s ) T o F o r f e i t e d s h a r e s A / C (Being forfeiture of 600 shares of Rs 100 each Due to nonpayment of I st & Final Call money. ) B a n k A / C ... .................. ... ( 600 X 80 ) .................... D R F o r f e i t e d s h a r e s A / C ................................ ....................... D R T o E q u i t y s h a r e C a p i t a l A / C (Being re - issue of forfeited shares at Rs 80 each) F o r f e i t e d s h a r e s A / C ................................ .................. D R T o C a p i t a l r e s e r v e A / C ( B e i n g T h e b a l a n c e o f f o r f e i t e d s h a r e s A / C i s t r a n s f e rr e d t o c a p i t a l r e s e r v e A / C ) 34. Journal Entries Date Particulers Amount Amount a) B a n k A / c ................................ ................................ ........ D r T o D e b e n t u r e A pp l i c a t i o n & A ll o t m e n t A / c (Debentures Application & Allotment money received) 2,00,000 2,00,000 D e b e n t u r e A pp l i c a t i o n & A ll o t m e n t A / c .................... D r L o s s o n I ss u e o f D e b e n t u r e s A / c ................................ D r T o P r e m i u m o n R e d e m p t i o n o f D e b e n t u r e s A / c T o 10 % D e b e n t u r e s A / c (Debentures Application & Allotment money transferred to Debentures account and Premium on Redemption t r a n s f e rr e d t o L o s s o n I ss u e o f D e b e n t u r e s A / c ) 2,00,000 10,000 10,000 2,00,000 b) B a n k A / c ................................ ................................ ........ D r T o D e b e n t u r e A pp l i c a t i o n & A ll o t m e n t A / c (Debentures Application & Allotment money received) 1,90,000 1,90,000 D e b e n t u r e A pp l i c a t i o n & A ll o t m e n t A / c .................... D r L o s s o n I ss u e o f D e b e n t u r e s A / c ................................ D r T o 10 % D e b e n t u r e s A / c (Debentures Application & Allotment money transferred to Debentures account and Discount on issue of Debentures transferred to Loss on Issue of Debentures) 1,90,000 10,000 2,00,000 c) B a n k A / c ................................ ................................ ........ D r T o D e b e n t u r e A pp l i c a t i o n & A ll o t m e n t A / c (Debentures Application & Allotment money received) 2,10,000 2,10,000 D e b e n t u r e A pp l i c a t i o n & A ll o t m e n t A / c .................... D r T o 10 % D e b e n t u r e s A / c T o S e c u r i t y P r e m i u m A / c (Debentures Application & Allotment money transferred to Debentures account and Premium on issue transferred S e c u r i t y P r e m i u m A / c , ) 2,10,000 2,00,000 10,000 d) B a n k A / c ................................ ................................ ........ D r T o D e b e n t u r e A pp l i c a t i o n & A ll o t m e n t A / c (Debentures Application & Allotment money received) 2,10,000 2,10,000 D e b e n t u r e A pp l i c a t i o n & A ll o t m e n t A / c .................... D r L o s s o n I ss u e o f D e b e n t u r e s A / c ................................ D r T o 10 % D e b e n t u r e s A / c T o S e c u r i t y P r e m i u m A / c T o P r e m i u m o n R e d e m p t i o n o f D e b e n t u r e s A / c (Debentures Application & Allotment money transferred to Debentures account and Premium on Redemption t r a n s f e rr e d t o L o s s o n I ss u e o f D e b e n t u r e s A / c ) 2,10,000 10,000 2,00,000 10,000 10,000 35. Common size Balance Sheet of Surya Co Particulars 31/03/2020 Rs % 31/03/2021 Rs % I EQUITY AND LIABILITIES: 1) Shareholders’ Fund Share capital Reserves & Surplus 2) Non - Current Liabilities: Long term borrowings 3) Current Liabilities: Short term borrowings Trade Payables 8,00,000 50.00% 9,00,000 50.00% 1,00,000 06.25% 60,000 03.33% II 5,00,000 31.25% 6,00,000 33.33% III 1,50,000 09.38% 1,80,000 10.00% 50,000 03.12% 60,000 03.33% Total Equity and Liabilities 16,00,000 100% 18,00,000 100% I ASSETS: 1) Non - Current Assets: Tangible Assets Intangible Assets 2) Current Assets: Inventories Cash and Cash Equivalents Other Current Assets 7,00,000 43.75% 8,00,000 44.44% 5,00,000 31.25% 6,00,000 33.34% II 1,00,000 06.25% 1,50,000 08.34% 1,50,000 09.38% 1,70,000 09.44% 1,50,000 09.38% 80,000 04.44% Total Assets 16,00,000 100% 18,00,000 100% 36. 1. Inventory Turn Over Ratio = Cost of Revenue from Operation Average Inventory = 7,00,000 1,00,000 = 7 Times 2. Trade Receivable Turn Over Ratio = Net Credit Revenue from Operation Average Trade Receivables = 7,50,000 1,50,000 = 5 Times 3. Trade Payable Turn Over Ratio = Net Credit Purchase Average (Creditors + B/P) = 5,00,000 2,00,000 = 2.5 Times 4. Gross Profit Ratio = Gross Profit x 100 Net Sales = 3,00,000 x 100 10,00,000 = 30% 1. Revenue from Operation = Net Sales 2. Operating Profit = Gross Profit – Operating Expenses =3,00,000 – 1,00,000 = 2,00,000 Section E 37. In absence of partnership deed, the following provision of Indian Partnership Act, 1932 are to be applied (a) – Profit and losses are to be shared equally (b) – No interest is to be allowed on capital (c) – No interest is to be charges on Drawings (d) – Interest on Advance from Partners @ 6% p.a simple interest (e) – No remuneration is to be allowed to any of the partners 38. D R P & L A pp r o p r i a t i o n A / c f o r t h e y e a r e n d i n g 31 - 03 - 2021 C r To Interest on capital, B y P & L A / C X 10% x 2,00,000 = 20,000 Y 10% x 1,50,000 = 15,000 35,000 ( Profit before adjustment) 80,000 To Salary to Y 4,000 By Interest on drawings , To Commission to X 2,000 X = 2,000 Y = 1,000 3,000 T o P a r t n e r s c a p i t a l A / C , ( Profit After adjustment) X (3/5) = 25,200 Y (2/5) = 16,800 42,000 83,000 83,000 5. Operating Profit Ratio = Operating Profit X 100 Net Sales = 2,00,000 X 100 10,00,000 = 20 % 6. Net Profit ratio = Net Profit X 100 Net Sales = 1,00,000 X 100 10,00,000 Working Notes = 10 % 39. Statement of profit and loss of a Company. For the year ending Particulars Amount I. Income 1. Revenue from operations (Sales) 10,00,000 Total Income 10,00,000 II. Expenses 2. Purchases 4,00,000 3. Changes in inventories 2,00,000 4. Employee benefit expenses 1,00,000 5. Other expenses 2,00,000 Total Expenses 9,00,000 Profit Before Tax 1,00,000 9. Tax 30,000 Profit After Tax 70,000 40. Comparative Income statement Particulars 31/03/2020 31/03/2021 Increase/ Decrease % Net Revenue from Operations Add Other Incomes 5,00,000 50,000 8,00,000 60,000 3,00,000 10,000 60% 20% Total Revenue (A) 5,50,000 8,60,000 3,10,000 56.36 Cost of material consumed 1,00,000 1,50,000 50,000 50% Purchase of stock in trade 2,00,000 3,00,000 1,00,000 50% Changes in Inventory Employees benefit Expenses 40,000 60,000 20,000 50% Depreciation & Amortizations 10,000 15,000 5,000 50% Financial cost Other Expenses Total Expenses (B) 3,50,000 5,25,000 1,75,000 50% Profit Before Tax (C) = (A - B) 2,00,000 3,35,000 1,35,000 67.5% Less Tax Expenses @ 30%(D) 60,000 1,00,500 40,500 67.5% Profit After Tax (E) = (C - D) 1,40,000 2,34,500 94,500 67.5% ******************** ******************************************************************* *** PREPARED BY , ASHWINI C L DEPT OF COMMERCE HKS PU COLLEGE HASSAN